Buy Infosys (1985.5 )
SL 1965 T 2050, 2060
Buy Infotech Enterprises (367 )
Sl 360 T 385, 391
Buy ACC (858 )
SL 849 T 887, 895
Buy CMC (1220)
Sl 1200 T 1280, 1300
Buy Bombay Dyeing (562)
SL 550 T 591, 597
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Friday, May 25, 2007
Weekly Stock Ideas
Market Update
Ray of hope for bulls
There's a place so dark you can't see the end…
And dust / a spot of light floods the floor…
Just as the bulls were struggling to find any direction amid concerns of CRR hike, dullness across the global equity market and apprehensions regarding the surge in Rupee, a ray of hope emerged from IT counter, that sparked an impressive comeback for the bulls. Amid all the gloom and doom, Indian bulls bucked the negative trend across the world and marched ahead with IT stalwarts leading the way.
Marketmen believe that the recent rise in rupee has reached to an important level. Around which RBI may intervene to protect the margin of exporters. Value buying in IT stocks drove the key indices higher. Rupee was stable around 40.59 per dollar today, holding at the strongest level since May 1998. Speculations that the Indian rupee may decline from a nine-year high and lower inflation provided the much-needed ammo for the bulls to advance further. India's inflation slowed to an eight-month low in the week ended May 12 due to a drop in textiles and food product prices.
Finally, the BSE 30-share Sensex closed at 14338, up 35 points or 0.24% and NSE Nifty closed at 4248, up 33 points or 0.80% over the week led by gains in REL, Satyam Computer, NTPC, Tata Steel and HLL. Technology, Oil & Gas, Metal and Capital Good stocks contributed significantly towards the gains over the week. Banking stocks witnessed some profit booking after a terrific run up over last one month.
Auto stocks closed lower after crude oil prices roar past $65 per barrel mark. Bajaj Auto also contributed towards the weakness across the sector. The scrip lost over 5% over the week. Bajaj Auto continued to underperform, on concerns that a plan to let Allianz SE raise stakes in joint ventures could lead to the erosion of shareholders value. Tata Motor declined by 2% to Rs726, M&M was down by 0.2% to Rs731 and Hindustan Motors dropped by 3.7% to Rs32.
Robust economy growth boosted the Capital Good stocks led by gains in BHEL, the scrip advanced by 3.2% to Rs2802, L&T gained 1% to Rs1739, ABB surged by over 4% to Rs4488 and Punj Lloyd advanced by 1.1% to Rs182.
IT stocks recovered towards the end of the week on value buying. Satyam Computer rose by over 3% to Rs471, Patni Computer surged by over 7% to Rs549, Infosys edged higher by 0.2% to Rs1985 and Wipro gained marginally 0.2% to Rs543.
Expectations of normal monsoon rains boosted the FMCG stocks. HLL, ITC were in the limelight over the week shrugging off concerns of late arrival of Monsoons. Earlier, in the week, the MET announced that India's monsoon, has stalled over the Bay of Bengal. HLL spurred by over 5% to Rs203, Tata Tea rallied by over 8.5% to Rs915, United Spirits zoomed by over 7.5% to Rs1140 and Britannia added 6% to Rs1504.
Metal stocks were also among the major gainers as the index gained by 2.3%. Index heavy weight Tata Steel led from front as the scrip gained by over 5% to Rs623, SAIL was also up by over 6.5% to Rs148, Jindal Steel rose nearly by 8% to Rs163 and JSW Steel added 2.3% to Rs613.
Oil & Gas refinery lost some ground after smart gains over last week. Oil Marketing companies fell sharply after Brent crude oil price surged over $70 mark. In comparison with the rise in international oil prices, the local prices of the products have not been increased, contributing losses for the companies. HPCL dropped nearly by 7% to Rs279, IOC was down by over 5.5% to Rs475 and BPCL dropped 2.8% to Rs364.
Mid-Cap and Small Cap stocks also advanced further in line with the heavyweights. PTC India, Raj TV, Ceat and NIIT Tech were among the major gainers. PTC surged smartly over the week by 15% to close at Rs66, the company is partnering with MCX for a national electricity exchange. NIIT Tech rose by 17% to Rs604 after the company announced bonus issue in the ratio of 1:2.
A new high for Sensex?
After Nifty’s turn this week, to surge past all time high, it could well be another historic week again, this time for benchmark Sensex to make a new high. Well! Bulls would certainly hope so. Benchmark Sensex is just 385 points away from its previous peak achieved on Feb 9 '07. However, given so much bullishness around, it would be wise to apply caution at every level. The trend of the local rupee will continue to play a deciding role for the markets. Inflation has cooled down considerably to an eight-month low, indicating that interest rates are nearing their peak.
Though the medium to long-term outlook is bullish, volatility is likely to persist with F&O expiry in the coming week. Although stock specific activity will continue depending on the flow of news, the market is expected to consolidate at higher levels. Global cues will again play an important role for the markets, as the mood on the market is being dictated by trends in global markets.Weekly Close: Rebounce but Fear of CRR haunts!
Lack of negatives across the globe led to strong start for the week. Markets across the globe were near there highs..Indian market too traded near its high but hesitated to touch the high. Overall sessions were volatile and jittery. Sensex gained marginally by 0.4% for the week mainly dragged by cement and banking counter. There were market buzz that RBI may hike CRR on the road to bring inflation 4-4.5%...However, no such action was seen. Cement Cos reduced the prices by Rs 3-4 per bag in Andra Pradesh in order to pass the excise duty benefits to consumers. Ahead of the rains cement prices will come off and this may be a natural effect. But we continue to expect stronger cement prices. China increased the interest rates and also increased the free float band for the Yuan which saw Yuan at a record high against the Dollar..Rupee appreciation continued to be the root cause of weakness in IT. Some comments from market experts turn out to be reason for selling across the globe. Former ex Chairman Alan Greenspan indicated the feared a 'dramatic contraction' in the Chinese stock market.
Sensex gained by 0.4%. Gains for week was led by Suzlon 24%; RNRL 15%; ZEEL 10%; REL Cap 8%; Tata Tea 8.6%; Essar Oil 6.9%; HLL 5.29%; TISCO 5%. Gains were erased by Sun -7.3%; Arvind -6%; Bajaj -5%; ACC -1.94%; Gujarat Ambuja -4.4%; Grasim -1.7%; India Cement -2.7%.; BPCL -2.82%; IOC -5.36%; HPCL -7%.
Cement Companies cuts prices by Rs 3-4 per bag in Andra Pradesh... The Govt has changed excise duty to 12% those who sell above Rs 190 per bag, instead of Rs 600 per ton which has fixed in budget. Immediately after the budget companies have raised the prices by Rs 10-12 per bag. So the companies now agreed to pass the benefits to customers. Ahead of the rains cement prices come off and this may be a natural effect. We continue to expect stronger cement prices..
On the economy front, there were rumours of a CRR hike this week. Fuelling that, was the fact that the RBI had been rumoured to be buying Dollars to keep the Rupee from appreciating further. The bank stocks are inflation sensitive. This counter was also dragged on back of rumours that RBI may hike CRR inorder to keep inflation under control and bring it to there target level of 4-4.5%. But rumours are never true and case was no different here. No CRR hike was seen. But liquidity crunch is still and issue and we would prefer to wait and watch here !
Reliance continued to be on fire. Some paper reported that Anil Ambani apparently told some market experts that RIL holds far more gas than what has been already certified of 80 million cubic meters per day. It could be over 200 MCMD. The gas finds, Anil said, will be commercially exploited by the second half of 2008, and will see India emerging as the cheapest producer of fertilisers and electricity in the next 3-4 years. Anil also added that the way things were going; the Rupee could touch Rs 30-35 per dollar some time this year. We have little reason to disbelieve. We also heard that apart from the KG6 discovery, the MN 4 would be a big surprise as well. This would need to be if this statement that India would be the cheapest producer for electricity and Fertilisers.
Under normal valuation parameters, Reliance have run up far more than fundamentals. As per analyst reports, the price of the upstream assuming 50 TCF reserves and 80mmscmd peak production capacity the valuation arrived at is around Rs 600 per share for Reliance. CLSA says that going by Nikko resources valuation (Nikko has 10% stake in KG D-6 and 15% in MN-D4) the valuation attributed is closer to Rs 900 per share. However, going by the above.. These Valuations could see a significant upward rerating. The catch here remains the quantum of the Gas and its realisability. More than that, the placement of 12 cr warrants to the promoters at Rs 1400 post such a strong run up is something which is unprecedented for a large cap company. Money to be invested by the Promoters is 17000 crores. The holding increases to 55% from 51%. Why would a promoter do this and at this stage.. ? Does Anils revelation carry the answers?
Suzlon was high on energy! The company won the bid for RE Power after Areva got out of the bidding process. It was a do or die for Suzlon and this win ensures the long term story for Suzlon. The stock surged on back of the acquisition but the near term is likely to face earnings pressure. The management indicated that the acquisition was not EPS dilutive but that really needs to be seen.
Tata Tea was another hot story for the week. Tata Tea sold its 30% holding in Energy Brands Inc; USA ("EBI") through its indirect UK subsidiary Tata Tea (GB) Investments Ltd to Coco Cola company for $1.2 bn. This deal was done for USD $677mn based on an enterprise valuation of US $ 1.2 Billion of EBI. Great profits !
Educomp rallied on the back of the fact that FII holdings were just about to reach the caution limit of 24% the maximum permissible. FIIs probably fell head over heals over each other trying to catch it before it gets into the restricted list. However, we think that the stock should come off now as its now restricted for buying. Further buying would need RBI permission.
HLL gained 5% for the week. Prices of detergent brands Surf Excel Blue and Rin Advance by 2.5%. HLL also implemented a re-grammage exercise on two SKUs of 100 gm and 300 gm of Lifebouy which would increase prices by 11%. Price hike is certainly good...However increasing competition and ad spent really makes things tough here and this hike is really to pass on increasing cost pressures. We like Godrej Consumer in this space. The company is a player in the soaps, Toiletories and hair color market. Previous year margins were softer given the increased Palm oil prices which are up over 35% and other raw material prices. Soap and Hair colour prices was increased this March. Overall the growth is what makes Godrej an interesting play in the FMCG space. The company has entered into a JV for feminine Hygene where it will also have Snuggies, the diaper product. Recent acquisitions of International brands were the big drivers for growth. The segments of Hair color and toiletories is an interesting one and fast growing. Going ahead the risks remain from increasing marketing costs.
Among mid caps SKF rallied on the back of rumours of SKF buyback offer. The parent holds about 54% stake in the company. Interesting to note that the company actually had an IT expense of Rs 21 crore as revenue expense. The figure was Rs 12 crore for last year. This was for implementation of SAP. The company implemented SAP this year. More than the benefits of SAP.. the bases of such a large number from the expense would be the big kicker next year. The company's Direct consumer Delivery (DCD) model is one which makes SKF as a one window for any product made by SKF globally. This ensures higher revenues. Near term the margins will fall off as the March quarter margins were helped by a stronger rupee and the kick off in the DCD model. Lower duties for imported bearings came in the first quarter itself but will no longer be there henceforth. Another negative is that slower growth of 2 wheeler impacts them and thats been the story for now. FAG bearings also saw interest on the back of SKF. We think FAG is a good story as well though we like SKF more for its replacement market. More interest stories in mid caps are under interpretation. We will continue to bring interest stories to you with sound fundamental. Keep watching !
Markets ends with small gains
The market ended the week with small gains, on account of mixed trend in index pivotals. However it was highly volatile during this week pulled by series of local and global events.
The Sensex gained 34.59 points for the week ended 25 March 2007 to settle at 14,338.45, while the NSE Nifty was up 33.65 points or 0.79% to 4,248.15
The week started on an upbeat note with the BSE Sensex advancing 115.19 points, at 14,418.6, on 21 May 2007, tracking firm Asian and European markets. The S&P CNX Nifty, advanced 46.40 points, or 1.10%, at 4,260.90, an all-time closing peak before striking an all-time high of 4,269.35 in intra-day trade. Shares from oil & gas, metal and FMCG space were in high demand.
The Nifty struck fresh all-time high of 4,281.60 a day later (22 May 2007), as strong buying for frontline pivotals continued. The Sensex rose 35.12 points, or 0.24%, to 14,453.72
The Sensex fell 90.46 points to 14,363.26 on 23 May 2007 as bulls took a breather and liquidating positions in the last hour of trade. Except for selective buying interest seen in metal and capital good sector, shares from auto, FMCG, oil & gas and banking space declined on profit taking.
Profit booking continued a day later 24 May 2007, with the BSE 30-share Sensex dipped a sharp 145.15 points to 14,218.11.
On 25 May, the Sensex staged a smart intra-day reversal to end with 120.34 point spurt to 14,338.45. Short covering triggered rally in second half of the day’s trading session.
Reliance Industries (RIL) advanced 1.61% to Rs 1,726.75. The scrip shrugged off media reports it is likely to miss the June 2008 deadline for commercial production of gas from the Krishna Godavari basin. The delay is mainly due to late deliveries of deepwater drilling rigs by Transocean Inc. RIL is relying on these oil rigs to the start the commercial production of gas from the basin.
State-run power generation major NTPC rose 5.20% to Rs 163.80. It is planning a foray into wind power with an investment of over Rs 12,000 crore, reports said. The company will have wind energy projects with a total capacity of 200-250 MW. Besides this, the state-run company is working on hydroelectric projects and a few biomass plants. It is also said to be working with Asian Development Bank, and is planning to rope in a private partner for the new venture.
State Bank of India (SBI) edged lower by 2.06% to Rs 1298.20. It has taken up a plan to reach 100,000 unbannked villages in the country within the next two years. It aims is to open at least one bank account for each family in these villages. SBI plans to access one lakh villages in India within the next two years. SBI’s strong Q4 March 2007 results announced on Saturday, 12 May 2007, has aided the rally.
Tata Steel advanced 5.63% to Rs 624.35 after its consolidated net profit had increased 41% to Rs 1103.50 crore in Q4 March 2007. Sales rose 21% to Rs 4980.44 crore in Q4 March 2007. Net profit jumped 20% to Rs 4222.15 crore in the year ended 31 March 2007. Sales increased 15% to Rs 17552.02 crore in FY 2007. The private sector steel major has reportedly received permission from Vietnam's government to work with Vietnam Steel Corp on a $3.5 billion steel complex in the southeast Asian country.
Tata Motors slipped 2.15% to Rs 726.80 after its Q4 March 2007 OPM shrank to 11.69% from 12.9% in Q4 March 2006. During trading hours on 18 May 2007, Tata Motors reported a 25.57% increase in consolidated net profit to Rs 2,169.99 crore in the year ended March 2007 compared with Rs 1,728.09 crore in FY 2006. Total income moved up to Rs 32,579.59 crore (Rs 24,012.97 crore). The group posted a net profit of Rs 649.81 crore in Q4 March 2007 as against Rs 522.60 crore in Q4 FY 2006. Total income increased to Rs 9,790.09 crore (Rs 7,866.06 crore).
Bajaj Auto slumped 5.08% to Rs 2170.65 triggered a flurry of rating downgrades by brokerage houses disappointed about the post-demerger structure and lack of clarity about future business plans. It reported an 11.1% fall in net profit to Rs 308.31 crore in the fourth quarter ending March 2007, from Rs 346.97 crore. Net sales rose 6.8% to Rs 2313.55 crore, from Rs 2165.86 crore.
PSU engineering major Bhel rose 3.11% to Rs 2702.15 ahead of its record date of 1 June 2007 for the proposed 1:1 bonus issue. The company has earmarked about Rs 3,200 crore for investment in the Eleventh Five-Year Plan period to increase manufacturing capacity from the current 6,000 Mega Watt (MW) to 15,000 MW per annum.
Debutante Hilton Metal Forging settled at a slight discount at Rs 67.60 on 24 May. It debuted at Rs 75 per share on the BSE today, 24 May 2007, up 7.14% from the IPO price of Rs 70. It hit a high of Rs 80 and Rs 66, respectively. The company specialises in the manufacture of forgings for the oil, petrochemical, pharmaceutical and automobile industries
India's wholesale price index rose 5.27% in the 12 months to 12 May, lower than the previous week's increase of 5.44% due to a drop in textiles and food product prices, government data showed on Friday, 25 May 2007. The figure was marginally higher than the market's expectation of 5.24%.
Annual inflation for the week ended 17 March 2007 was revised to 6.56%, from 6.46%. The annual inflation rate was 4.63% in the corresponding week of the previous year. The wholesale price index stood at 211.7 points in the week ended 12 May 2007.
Market expected to consolidate
The market is expected to consolidate at current levels, before making any big upmove.
Inflation which had been a concern for quite a while now seems to be getting over. Indian inflation fell to its lowest level in eight months in mid-May, data showed on 25 Friday 2007. The widely tracked wholesale price index rose 5.27% in the 12 months to 12 May. Annual inflation had hit a two-year high of 6.69% in late January 2007.
The market is expected to stay highly volatile ahead of the expiry of derivatives contracts for May series scheduled on 31 May
The market is also seriously worried about big IPOs lined up June onwards. It is believed to be the highest-ever capital mobilisation. Lot of liquidity will be sucked off from the secondary market. This will make its way to the primary market.
Real estate giant DLF has set a price band of Rs 500-550 per share for its initial public offer and lowered its mop-up target to a maximum of Rs 9,625 crore, against earlier estimates of up to Rs 13,600 crore. The issue will open on 11 June and close on 14 June 2007.
DLF would come out with a public issue of 17.5 crore equity shares of Rs 2 each through 100% book-building process. The post-issue dilution of the issue would be over 10%. This public issue would still be largest IPO as ONGC had raised Rs 10,500 crore through follow-on-offer, a company official said.
Also the country’s second largest bank, ICICI Bank, has sought approval from Sebi to sell Rs 17,500 crore of shares to local and overseas investors. The bank has set a target of launching the issue in June. The offer may be raised to Rs 20,100 crore depending on demand, the sale document said.
On the flip side, rumors of the Reserve Bank of India (RBI), which has already raised the cash reserve ratio (CRR) thrice since December 2006, contemplating another hike, though only on incremental deposits this time, is weighing on the bourses. There is a buzz in the market that the decision can come today evening. CRR is the percentage of deposits that banks are required to keep with the RBI.
RBI is particularly concerned about absorbing excess liquidity since it has lowered the inflation target from 5-5.5% to 4-4.5% for 2007-08.
The marketmen will also keenly await the progress of monsoon. The annual monsoon is predicted to strike the Kerala coast Sunday, 27 May 2007, four days ahead of its normally scheduled date of arrival on 1 June 2007. From Kerala the monsoon travels upwards to the parched central Indian plans and is expected to bring rains to New Delhi by the end of June.
However the fall will be cushioned as buying support will emerge at lower levels, followed by fantastic set of March quarterly and annual results from India Inc
Technically, the Sensex has strong support at 14,000 level and on the upside faces a stiff resistance at 14,600 level. Similarly, the Nifty has support of 4,180 on the downside, while on the upside there is a near term resistance at 4,300.
Crude oil prices were hovering near $64.53 a barrel and Brent at $71 a barrel exchange, Any sharp rise from here may lead to further fall.
Major March 2007 quarterly results scheduled next week include Mahindra & Mahindra, Unitech, Canara Bank, Larsen & Toubro, Hindustan Petroleum Corporation, Britannia Industries, NTPC, Tata Power Company, Punj Lloyd and Bharat Heavy Electricals (Bhel).
Neyveli Lignite Corporation, Dishman Pharmaceuticals and Chemicals, Northgate Technologies, Jindal Stainless, Aegis Logistics, HOV Services, Thermax, Crompton Greaves, Welspun India, Madras Cements, Cummins India and Action Construction Equipment will also declare their March 2007 quarterly results
IT and capital goods stocks help market recover
After gyrating almost 319 points for the day the Sensex closed the session with a gain of 120 points for the day. The market had a gloomy start, with the weak global indices dampening the trading sentiment here and triggering an all-round selling. The Sensex touched the day's low of 14046, down 172 points, within a few minutes of the opening bell. The melting metal prices in international markets also acted as a negative factor. But, the resumption of buying at lower levels and fall in the inflation rate helped the Sensex to recover the lost ground and the index entered into the positive territory by afternoon. Information technology (IT) and capital goods stocks provided enough support to the Sensex to touch the intra-day high of 14365. Satyam Computer, Infosys, Wipro and L&T were the major gainers on the back of buying interest. The Sensex finally settled at 14338, up 120 points, and the Nifty closed the session at 4248, up 43 points.
The breadth of the market was positive, with gainers outnumbering the losers in the ratio of 1.22:1. Of the 2,660 stocks traded on the BSE 1,418 stocks advanced, 1,153 stocks declined and 89 stocks ended unchanged. Among the sectoral indices the BSE CG Index flared up by 2.53%, the BSE IT Index rose 2.49% and the BSE Teck Index moved up by 1.87%.
Barring a few all Sensex stocks ended at higher levels. HDFC flared up 3.64% at Rs1,819, Satyam Computer bounced back sharply and shot up by 3.48% at Rs472, Infosys zoomed 2.57% at Rs1,986, Tata Motors moved up by 2.25% at Rs728, L&T scaled up 2.20% at Rs1,739, Reliance Communication surged by 2.14% at Rs504, Wipro jumped by 1.99% at Rs542 and SBI gained 1.05% at Rs1,298.
IT stocks were in demand and attracted strong buying support. NIIT Tech spurted by 10.30% at Rs606, Webel-Sl Energy shot up by 8.90% at Rs382, Patni Computers flared up 7.83% at Rs549, Tech Mahindra surged 5.41% at Rs1,562, Logix Micro zoomed 4.99% at Rs214, Kernex Micro jumped 4.88% at Rs151 and CMC jumped by 4.18% at Rs1,228.
Over 2.26 crore Reliance Natural Resources shares changed hands on the BSE followed by Reliance Petroleum (61.93 lakh shares), Nagarjuna Fertilizers (56.81 lakh shares), IFCI (55.08 lakh shares) and Idea Cellular (51.80 lakh shares).
Value-wise Suzlon Energy clocked a turnover of Rs230 crore followed by Advanta (Rs179 crore), Reliance Industries (Rs147 crore), Devi's Lab (Rs139 crore) and Reliance Capital (Rs116 crore).
Reports Going Offline
We've have been thinking of this for sometime and today there was a trigger which convinced us to do this. You will see this site transforming to something more useful than JUST reports or will die a natural death, and we hope its the former.
We won't be posting any more reports on the site.
All the reports will be
Thanks for all the support and we are sorry that we had to do this.
FAQ
1.Why did you shut down?
A. As we mentioned - a trigger coupled with a the thought that we have done enough for the Indian Investor to learn and research before he starts buying on tips!
2. Are we going to start a private group and charge money to join it ?
A. No, we not going to start any private group or charge anything. Its just over. We are sorry
3. Where can I get reports now?
A. There are plenty of other groups. Just search - you will find them
4. Any thoughts?
A. Just don't buy anything because you got a tip. Research and do more research. Don't sell your stocks to FIIs cheap :). It was good being with you people.
5. Can I become a member?
A. No - there is no group to become member - Please don't ask.
6. Did you sell out ?
A. No, we didn't sell out to anyone. As we said it, we might come out in another avatar.
7. You could have made a lot of money!
A. The intention was never to make money.
8. How many posts were there on DP?
A. 7000+
9. Can I get old reports?
A. No, you can't - Sorry!
10. Did you get sued?
A. :) - No! Triggered though :). However, as I said, that really made us think more which led to this decision
We would like to thank all the amazing contributors through which the site was alive for so long. Cheers to you guys.
Update - May 27 2007
We have decided not to shut the site altogether, we will be posting recommendations from various brokerage houses as you see in some of the posts above.
Thanks!
Leave your thoughts in the comments below :)
Sensex ends with 141-point spurt, Suzlon Energy soars
The market saw a complete trend reversal, and settled with gains from initial weakness. A sharp short covering drive led the Sensex above the 13,500 mark, in the fag end of the day. Shares from IT sector led the rally today.
The 30-shares BSE Sensex jumped 140.61 points to 14,358.72, as per provisional closing. It had opened weak today, 25 May 2007, at 14,073 and plunged to a low of 14,046.06, on intense selling pressure for the third straight day as key pivotals declined. But from here is started advancing till it struck an intra-day high of 14,364.95.
Interestingly, all the European market and majority of Asian markets were trading weak. The Hang Seng index lost 1.34%, while the Nikkei 225 index was down 1.22%.
Suzlon Energy galloped a huge 17.76% to Rs 1364.70 on high volumes of 17.55 lakh shares on BSE. It surged to a high of Rs 1420, on momentum buying after the world’s sixth largest wind turbine generator finally secured German REpower as French major Areva opted out of the race. Interestingly, the REpower stock tumbled 10% in last trade and closed at 150 euros. Suzlon's last bid for REpower was also at 150 euros per share, valuing it at 1.5 billion euro.
As per Tulsi Tanti, Suzlon's chairman, his company as of now effectively holds 62% stake in REpower through its partnership with Portugal's Martifer and the agreement with Areva.
Suzlon on its own holds 7.8% in REpower. The company expects to get an additional stake of up to 15% by the end of today offer period expires. Tanti also informed that as per the agreement with Areva, the latter has agreed to sell its 30% in REpower to Suzlon anytime after one year, while Martifer has agreed to sell its 23% in REpower Suzlon after two years.
As per Tanti the acquisition will be EPS accretive from FY 2008, and will make Suzlon the fourth largest wind turbine maker in the world with an integrated power generation capacity of 3400 megawatt, which includes REpower capacity.
Suzlon will invest 150 million euro in its technology centre at Hamburg and the innovation centre in Denmark.
The wind turbine maker sees Europe as the best bet for future growth as it offers the highest margins. Suzlon expects 80% of its revenue from outside India in the next three-four years.
REpower is one of Germany’s biggest wind-turbine makers and one of the world’s leading companies in wind energy sector. It was the top traded counter on BSE with total turnover of Rs 230.34 crore.
The total turnover on BSE amounted to Rs 5,022 crore, which surged from Rs 3,857 crore by 14:30 IST
The market breadth, which indicates the overall health of the market, saw a sharp trend reversal. It was weak with 970 shares declining as compared to 596 advancing at 10:30 IST. But it turned positive in the post-lunch session as buying emerged for small- and mid-cap stocks: on BSE 1,426 shares advanced as compared to 1,169 that declined, while 83 remained unchanged.
Among the Sensex pack, 22 advanced, while the 8 declined.
IT stocks were back in demand as the rupee dipped further against the dollar and was quoted marginally lower in late morning trading following continued weakness in equity market.
In quite trade at the Interbank Foreign Exchange (forex) market, local currency resumed lower at 40.61/62 per dollar from overnight close of 40.59/60 a dollar and later traded arround 40.6150 level in late morning deals.
Meanwhile, traders feel the Reserve Bank of India's (RBI) move to hike the cash reserve ratio (CRR), more likely only on incremental deposits, is expected to provide some stability in the forex market.
Satyam Computers jumped 3.53% to Rs 472.10, and was the top gainer. Wipro (up 2% to Rs 542.50), Infosys (up 2.92% to Rs 1991) and TCS (up 0.66% to Rs 1232) were the other gainers.
A rise in the rupee directly impacts revenue and profit of IT firms, which derive a lion’s share of revenue from exports to the US.
Second-rung software scrips also joined the rally. MphasiS (up 1.68% to Rs 308.55), i-flex (up 1.33% to Rs 2220), NIIT Technologies (up 11.59% to Rs 613) and CMC (up 4.78% to Rs 1235) gained.
Index heavyweight Reliance Industries (RIL) rose 0.38% to Rs 1732 on 8.54 lakh shares. It surged from a low of Rs 1701
HDFC (up 3.14% to Rs 1810), Reliance Communications (up 2.69% to Rs 507), and L&T (up 2.26% to Rs 1740), were the other gainers.
Cigarette major ITC rose 0.57% to Rs 167.10 after its net profit increased 14.6% to Rs 650.69 crore in Q4 March 2007 as against Rs 567.89 crore in Q4 March 2006. Sales were up 24.85% to Rs 3,568.62 crore (Rs 2859.08 crore). Net profit advanced 20.8% to Rs 2,699.97 crore in the year ending March 2007 as against Rs 2235.35 crore in FY 2006. Sales surged 26.1% to Rs 12705.79 crore (Rs 10,076.61 crore ).
On consolidated basis, net profit rose 20% to Rs 2,755.26 crore in FY 2007 as compared to Rs 2,295.38 crore in FY 2006. Consolidated sales edged higher by 24.4% to Rs 13234.49 crore (Rs 10,637.99 crore).
Bajaj Auto declined for the seventh consecutive session since it declared a scheme of demerger along with its poor set of results during trading hours on 17 May 2007. It however recovered from low of Rs 2141, was down marginally by 0.06% to Rs 2,170 on 1.82 lakh shares.
Disappointment about the post-demerger structure and lack of clarity about future business plans triggered a flurry of rating downgrades by brokerage houses.
It has eroded 20.60%, from Rs 2718.60 on 11 May till Rs 2171.40 on 24 May.
Prior to this, Bajaj Auto was on a losing streak, declining a little under 19% in the previous four trading sessions after the surprise revelation that Allianz — Bajaj’s partner in its two insurance ventures — has a ‘call option’ to buy up to 74% at a nominal price. This was the biggest disappointment in the demerger plan.
Most analysts expected Bajaj Auto to remain the majority partner, while allowing Allianz to raise its stake up to 49%. They see a high possibility of the government raising foreign investment limit in insurance sector to 74% and Allianz exercising the option to hike the stake.
The insurance business of Bajaj Auto was valued at around Rs 800 per share. But going by the new structure, the value has been trimmed to Rs 300 per share. So the fall was more of a realignment to its fair value of Rs 2,250.
HDFC bank was the top loser, down 1.33% to Rs 1075.10 on 88,344 shares
Tata Steel slipped for the second straight day, down 1.06% to Rs 624.90, after the Reserve Bank of India (RBI) on 24 May 2007 stopped the purchase of the company’s shares by foreign institutional investors (FII) as the foreign investment in the world's sixth largest steel maker reached the permissible limit of 22%.
Increasing interest of foreign investors in Tata Steel, following the acquisition of Anglo-Dutch steel maker Corus, had pushed up the FII stake in the company by more than 4% in the last one-and-half month. The FII interest has continued to increase in the steel giant, though a large number of retail investors exited the company following the dip in share prices of Tata Steel after the acquisition of Corus. The FII stake in the company was 17.24% end March 2007. It had slumped 4.04% to Rs 632.25.
Crude for July delivery jumped as much as 35 cents, or 0.6%, to $64.53 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $64.38 at 10:30 a.m. in Singapore.
Brent for July delivery was at $70.67 a barrel on the London-based ICE Futures exchange, after rising 0.2% to $70.72 yesterday, its highest close since 28 August.
The market saw high volatility as inflation data was released by noon today. India's wholesale price index rose 5.27% in the 12 months to 12 May, lower than the previous week's increase of 5.44% due to a drop in textiles and food product prices, government data showed on Friday, 25 May 2007. The figure was marginally higher than the market's expectation of 5.24%.
Annual inflation for the week ended 17 March 2007 was revised to 6.56%, from 6.46%. The annual inflation rate was 4.63% in the corresponding week of the previous year. The wholesale price index stood at 211.7 points in the week ended 12 May 2007.
The market is seriously worried about big IPOs lined up June onwards. It is believed to be the highest-ever capital mobilisation. Lot of liquidity will be sucked off from the secondary market. This will make its way to the primary market.
Real estate giant DLF has set a price band of Rs 500-550 per share for its initial public offer and lowered its mop-up target to a maximum of Rs 9,625 crore, against earlier estimates of up to Rs 13,600 crore. The issue will open on 11 June and close on 14 June 2007.
DLF would come out with a public issue of 17.5 crore equity shares of Rs 2 each through 100% book-building process. The post-issue dilution of the issue would be over 10%. This public issue would still be largest IPO as ONGC had raised Rs 10,500 crore through follow-on-offer, a company official said.
Also the country’s second largest bank, ICICI Bank, has sought approval from Sebi to sell Rs 17,500 crore of shares to local and overseas investors. The bank has set a target of launching the issue in June. The offer may be raised to Rs 20,100 crore depending on demand, the sale document said.
Wall Street retreated yesterday after housing data showed sales surged in April by the largest amount in 14 years and damped hopes that an interest rate cut would be needed to stimulate the economy.
The Dow Jones industrial average fell 84.52 points, or 0.62%, to 13,441.13. The shift in the direction of the Dow and the other major indexes Thursday was pronounced. The Dow rose nearly 100 points to 13,624.55 early in the session -- eclipsing its previous trading high of 13,609.75 reached Wednesday -- before pulling back.
Broader stock indices also declined. The Standard & Poor's 500 index lost 14.77 points, or 0.97%, to 1,507.51, and the Nasdaq composite index fell 39.13 points, or 1.52%, to 2,537.92.
Technically, the Sensex has strong support at 14,000 level and on the upside faces a stiff resistance at 14,600 level. Similarly, the Nifty has support of 4,180 on the downside, while on the upside there is a near term resistance at 4,300.
The annual monsoon is predicted to strike the Kerala coast Sunday, 27 May 2007, four days ahead of its normally scheduled date of arrival on 1 June 2007. From Kerala the monsoon travels upwards to the parched central Indian plans and is expected to bring rains to New Delhi by the end of June.
Midday Trading Calls
Buy Glenmark Pharma above Rs 710. Stop Loss at Rs 664. Target of Rs 795 and Rs 935 (Delivery-based Call)
Buy NTPC and remain invested for a target of Rs 199 and Rs 266. Buy at current price and accumulate at Rs 160-148 levels. Long Term Stop Loss at Rs 135 (Delivery-based call)
Buy PTC at CMP of Rs 66.70 and at lower level and remain invested. Accumulate at lower levels of Rs 61 or below. Stop Loss at Rs 53. Expect a target of Rs 92-116 (Delivery-based Call)
Trading Calls
AG
Buy SAIL with stop loss of Rs 135 for a target of Rs 170.
Buy GMR Infrastructure with stop loss of Rs 450 for a target of Rs 560.
RB
Sell Bharti AItel with stop loss above Rs 853 for a target of Rs 811, Rs 797 & Rs 778. This is a day-trading recommendation.
Sell Reliance Communications with stop loss above Rs 508 for a target of Rs 480, Rs 476 & Rs 471. This is a day-trading recommendation.
DM
Sell Mphasis above Rs 301 with stop loss at Rs 307. This is a day-trading recommendation.
Sell Cipla above Rs 206 with stop loss at Rs 209. This is a day-trading recommendation.
Investsmart - Morning Call
Market Grape Wine :
In House :
Nifty at a support of 4170 & 4130 levels with resistance at 4229 & 4252 levels .
Sell : IntraDay : ACC below 857 targte of 841 s/l of 862
Buy : JetAir above 731.5 targte of 749 s/l of 726
Buy : DenaBnak positional : Target 52 s/l 38.5
Sell : in F&O ParsvNath below 307 target of 295 s/l 312
Sell : SCI in F&O below 201 target of 192 s/l 205
Out House :
Markets at a support of 14104 & 14014 levels with resistance at 14313 & 14393 levels .
Buy : RIL at dips
Buy : Kotak at dips
Buy : IDEA at dips
Buy : SunTV at dips
Buy : McDowell at dips
Buy : Sail at dips
Buy : Praj & Educomp
Dark Horse : Educomp , EKC , Asian , SKumar , Praj , TataTea , UTV & PSTL
Bullet : Patni with strict stop loss
TGIF : Thank God Its Friday : Markets at a High book profits at all higher levels
Anand Rathi - Daily Fundamental Snippets & Strategist - May 25 2007
Finally the citadel seems to have fallen as the major holders of it have booked profits, we mean the F.I.I.'S who were holding this index for a long time. The NIFTY futures saw a increase in OI 4.30 % with prices closing down indicating that lot of shorts positions were built and profit booking happened in a big way led by the foreigners. In the initial stage at the higher end huge profit booking happened. The FIIs were sellers in futures to the tune of 1347 crores of which they sold nifty futures alone to the tune of 965 crs and they bought options worth 95 crs , while they sold stock futures to the tune of 471 crores . The PCR is in a range of 1.45 indicating the trend in the market. The volatility has remained in the range of 21.50 levels indicating the feel in the market.
Among the Big guns, ONGC saw a gain of 1.11 OI with prices going down by 1.57% indicating that fresh shorts being built in the counter while RELIANCE gained OI by 0.34% and the price coming down by 1.65% indicating huge fresh selling taking at the historical high in the counter.
In the TECH front it was a mixed bag, INFOSYS & SATYAM we saw short covering and in TCS & WIPRO saw decrease in prices in the form of short built and fresh selling and showing weakness in the stocks.
On the other hand the BANKING counters we saw huge profit booking be it P.S.U's or PVT banks. Whether the OI was increased or decreased the end result being huge profit booking and selling on the one side coupled with bull offloading with new short positions being built showing total weakness in the sector.
In the METALS there was a mixed bag with TATA STEEL seeing huge profit booking along with HINDALCO & STERLITE. On the flip side we saw covering along with fresh buying in NATIONAL ALUMINIUM.
Considering the market data, it suggests the most awaited AND expected up-trend has been curtailed by profit booking today at the higher end and we need to wait and watch how the market behaves as we should also remember any negative movement here could BOOMERANG the so formed RALLY and we suggested only caution with a negative bias here over the last couple of sessions and should the market go below 4,000 we need to be careful thereon.
Anand Rathi - Daily Fundamental Snippets & Strategist - May 25 2007
Indiainfoline - Intraday Stock Ideas
NIFTY (4204) SUP 4174 RES 4220
BUY AIRDECCAN (137.05)
SL 134 T 145, 148
BUY COLGATE (378)
SL 373 T 387, 390
SELL INDIANB (125.5)
@ 127 SL 131 T 118, 116
SELL HANUNG (150)
@ 153 SL 157 T 142, 140
SELL IPCL (342.7)
@ 345 SL 349 T 332, 329
STRATEGY INPUTS FOR THE DAY
A weak end in store!
You cannot run away from a weakness; you must sometimes fight it out or perish. And if that be so, why not now, and where you stand? – Robert Louis Stevenson
At the end of the week, the last thing we want to do is start with a pessimistic note. But that’s the way the markets are set to open. Though we wouldn't want to spoil your weekend, looks like the bulls may have a tough day today amid weakness across global markets. The benchmark Brent crude oil futures have shot up above the US$71 per barrel mark owing to nagging concerns over supplies from key producers such as Nigeria and Iran. To make the matters worse, Thursday’s provisional figures show that both FIIs and local institutions were big sellers. Add to that rumours of another CRR hike and we have all the ingredients for a black Friday. Inflation figures will add to the swing by noon. Look at select opportunities inside and outside the m ain indices for the medium to short term. Be extremely choosy as the market appears to be in an overbought situation. We expect the intra-day gyrations to continue, which will only make life difficult for traders.
Suzlon will see lots of action as it has finally won the bid for acquiring Germany's REpower. HLL and other FMCG companies like Godrej Consumer may attract some attention amid reports of a fresh round of price increases. Cairn India is surely going to tank as the Government has rejected its offer of building a pipeline for evacuating crude from the Rajasthan block. It has instead been asked to set up a refinery. The government has also asked Cairn India to cut its daily peak production from 150,000 barrels per day.
BPCL may also be under attack as its Q4 net profit is down 60%. Centurion Bank of Punjab could also see some pressure due to lower than expected fourth-quarter earnings, though there was an extraordinary one-time hit. IT shares will remain in the limelight given the persistent rally in the rupee. L&T, Tata Motors, Ashok Leyland and M&M may benefit from a newspaper report that the Government will give them the Raksha Udyog Ratna status for lucrative defence procurements and defence contracts. PTC is partnering with MCX for a national electricity exchange. Real Estate companies will be in action as DLF has set a price band of Rs500-500. Fortis may gain amid reports of an out of court settlement with Dr. Naresh Trehan and the company management.
FIIs were net sellers to the tune of Rs1.6bn (provisional) in the cash segment, while the domestic investors offloaded stocks worth Rs1.36bn. In the F&O segment too, FIIs were net sellers of Rs13.48bn. On Wednesday, foreign funds pumped in Rs4.46bn in the cash segment. Mutual Fund were net buyers of just Rs162mn.
US stocks slumped on Thursday, as investors locked in gains after the recent rally. Government reports today showed that new home sales climbed the most in April since 1993 and durable-goods orders gained for a third month. Yields on 10-year Treasuries traded near the highest in almost four months. All financial markets in the US are closed on Monday for Memorial Day and many investors and other Wall Street professionals are taking a long weekend.
The Dow Jones Industrial Average decreased 84.52 points, or 0.6%, to 13,441.13. The 30-stock benchmark fell for a fourth day, its longest losing streak since Feb. 27, the day it tumbled 416 points amid a global stock rout sparked by a selloff in China. The Standard & Poor's 500 Index slipped 14.77 points, or 1%, to 1507.51. The Nasdaq Composite Index lost 39.13 points, or 1.5%, to 2537.92.
US Treasury prices rose, recovering from early weakness. The advance lowered the yields on the 10-year note to 4.84% from 4.85% late on Wednesday. In currency trading, the dollar rose versus the euro and fell versus the yen. COMEX gold for June delivery fell $9.30 to settle at $653.30 an ounce.
US light crude oil for July delivery fell $1.59 to settle at $64.18 a barrel on the New York Mercantile Exchange. The front-month contract was quoting 20 cents higher at $64.38 a barrel in extended trading in Asia. The London Brent crude gained 12 cents at $70.72 a barrel after surging to $71.80 earlier, the highest since Aug. 28, 2006.
European stocks dropped. The pan-European Dow Jones Stoxx 600 index slipped 0.7% to 393.60. The UK's FTSE 100 lost 0.8% at 6,565.40, the French CAC-40 slipped 1.2% to 6,048.31 and the German DAX Xetra 30 declined 0.5% to 7,697.38.
Asian stocks posted the biggest drop in five weeks today after signs of growth in the US economy damped speculation that the Fed will slash borrowing costs.
Toyota suffered its biggest drop in a month while BHP Billiton fell to a two-week low amid concerns that demand for their products will decline. Miners also fell after metals prices slumped.
The Morgan Stanley Capital International Asia-Pacific Index fell 1.2% to 147.59 at 11:20 a.m. in Tokyo. The drop, the most since April 19, pared the measure's advance this week to 0.2%. The Nikkei 225 Stock Average slid 1.6% to 17,416.11.
China's CSI 300 Index gained 0.8%, the only advance among Asia's stock benchmarks today.
A measure of six metals traded on the London Metal Exchange (LME), including copper and zinc, slumped 2.4% yesterday to the lowest since April 2. Copper slid 2.8%, zinc fell 2.2% and nickel dropped 2.6%.
Markets ended lower amid grapevine that the RBI may go for another CRR hike further delay in monsoon also dampened the sentiments. Global cues also were weak as former Federal Reserve Chairman Alan Greenspan said he fears a dramatic contraction for Chinese stocks.
Markets were unable to find any momentum to carry on as many of the large cap stocks witnessed profit booking, scrip’s like Tata Steel, ACC, Reliance Industries, ONGC, Bharti Airtel were among the major losers. All the major Oil & Gas stocks had a sluggish session, the Metal stocks also lost shine led by fall in the index heavy weight Tata Steel, the index was the major losers and lost 1.62%.
However stocks specific action continued, Divi’s Lab rallied by over 17% to Rs4751 as the company recommended stock split from face value of Rs10 to Rs2 each and TVS Motors also outperformed as the scrip rose over 6%. Finally, the 30-share Sensex ended lower by 145 points to close at 14218. NSE-50 Nifty lost 41 points to close at 4204.
ICICI Bank edged lower by 0.8% to Rs911 amid reports that the RBI has allowed Temasek and Government of Singapore Investment Corporation (GIC) to pick up 10% each in the country's largest private bank. The scrip touched intra-day of Rs930 and a low of Rs905 and recorded volumes of over 10,00,000 shares on NSE.
ABG Shipyard edged lower by 0.2% to Rs412 after the company announced that they have signed a MOU for acquisition of Vipul Shipyard. The scrip touched intra-day of Rs435 and a low of Rs409 and recorded volumes of over 1,00,000 shares on NSE.
Divi's Lab rallied by over 16% to Rs4727 after the company recommended stock split from face value of Rs10 to Rs2 each. The scrip touched intra-day of Rs4788 and a low of Rs4150 and recorded volumes of over 5,00,000 shares on NSE.
Opto Circuit edged higher by 0.5% to Rs356 after the Board of Directors of the company would meet today to consider issue of warrants to promoters, and issue of securities on a preferential basis to strategic investors. The scrip touched intra-day of Rs362 and a low of Rs354 and recorded volumes of over 34,000 shares on NSE.
Select FMCG stocks held firm in a falling market. HLL advanced by 1.4% to Rs201, Dabur was up by 1% to Rs378, Colgate surged by over 3.5% to Rs378 and Tata Tea added 0.9% to Rs882. However, McDowell slipped 2% to Rs1145.
Oil & Gas stocks witnessed selling pressure. Reliance Industries slipped by 1.7% to Rs1727, ONGC was down by 1.5% to Rs900, BPCL dropped by 3.5% to Rs371 and HPCL declined 4% to Rs287.
Lower metal prices on LME dragged the metal stocks lower. Sterlite Industries slipped by 1% to Rs533, Hindalco edged lower by 0.7% to Rs143 and JSW Steel dropped by 1.2% to Rs614. Tata Steel slipped by overt 4% to Rs631 after overseas investors will have to get RBI’s approval to buy shares of the company.
Banking stocks also lost ground on reports that RBI would consider another hike in CRR. Frontline stock SBI dropped by 1.7% to Rs1286, HDFC Bank was down by over 2% to Rs1091 and ICICI Bank edged lower by 0.8% to Rs911. PNB, OBC and Union Bank were among the major losers.
Telecom stocks also were in the receiving end. Reliance Communication fell over 3.5% to Rs493, Bharti Airtel was down by 1.6% to Rs837 and VSNL edged lower by 0.8% to Rs473.
Insider Trades: Sakthi Sugars Ltd: Merrill Lynch Capital Markets Espana S A SV has purchased from open market 330000 equity shares of Sakthi Sugars Ltd on 18th May, 2007
Sectoral Movement: BSE Metal index was the major loser and lost 1.62%, BSE Oil & Gas index (down 1.47%), BSE Bank index (down 1.45%) and BSE Technology index (down 0.57%) were among the other major losers. However, BSE FMCG index gained 0.24%.
Volume Toppers: RNRL, IFCI, Idea, SAIL, RPL, Hilton Metal, TTML, R Com, NTPC, Voltas, Tata Steel, Raj Tele, Deccan Aviation, BRFL, Ashok Leyland, Reliance Industries, ITC and Satyam Computer.
Upper Circuit: Atlanta, Eicher Motors, Advanta, Agro Tech, Tripex Overseas and Mefcom Agro.
Delivery Delight: Andhra Bank, Crompton Greaves, Dabur India, India Cements and TVS Motor Company.
Abnormal Delivery: Titan Industries, Hindustan Motors, Escorts, GNFC, CEAT, Tata Chemicals, ACC, Bank of Baroda, Federal Bank, Indian Oil Corporation, Bajaj Auto, Union Bank of India and Grasim Industries.
Stock Futures with largest increases in OI: United Phosphorous, GE Shipping, Educomp Solutions, ABB, Divi’s Lab, Financial Technology, EKC, Renuka Sugar and Reliance Capital.
Stock Futures with Decreases in OI: Jindal Steel, Matrix Lab, Sun TV, JSW Steel, Aban Offshore, HDFC Bank, Bank of India and Reliance Energy.
Results Today: BHEL, Denso India, Godrej Industries, Gulf Oil, IndusInd Bank, Ipca Labs, ITC, IndusInd Bank, Monsanto India, Orient Paper, Ramkrishna Forgings, Ugar Sugar Works, Usha International and VSNL.
Results Corner: Centurion Bank of Punjab Q4 profit at Rs6.7bn (down 60%), revenues at Rs243.8mn (up 7%).
Brokers Recommendations: GMR Infra – Outperform from Macquarie with target of Rs560
Bharat Forge – Under Performer from Prabhudas Liladhar.
Long Term investment: Wipro
Major News Headlines: Chidambaram says increasing overseas inflows create problems
India must learn to manage overseas inflows: FM
Ramunia, Punj to jointly bid for $1bn project
NTPC plans to set up power plant in Nigeria
Essar Oil starts a new 10.5mn tons a year refinery in Gujarat
K Sera Sera to meet on 30th May to discuss fund raising programme
ABG Shipyard to acquire Vipul Shipyard
Accentia Technologies gets order worth $2mn
Market to stay cautious ahead of key events
The market is likely to stay highly cautious ahead of key events today and in near future. Volatility will be intense in times to come.
An important set of data marketmen would be keenly awaiting today (25 May 2007) is that of inflation. India's wholesale price inflation rate is forecast at 5.24% for the 12 months to 12 May 2007, the lowest since early September 2006l. The data will be released around noon. Annual inflation in the previous week was 5.44%.
The annual rate had hit 6.69% on 27 January 2007, its highest in more than two years, but has since moderated as the central bank tightened policy and the government cut duties on a range of items to rein in prices.
Rumors of the Reserve Bank of India (RBI), which has already raised the cash reserve ratio (CRR) thrice since December 2006, contemplating another hike, though only on incremental deposits this time, in weighing on the bourses. There is a buzz in the market that the decision can come today evening. CRR is the percentage of deposits that banks are required to keep with the RBI.
RBI is particularly concerned about absorbing excess liquidity since it has lowered the inflation target from 5-5.5% to 4-4.5% for 2007-08.
The market is seriously worried about big IPOs lined up June onwards. It is believed to be the highest-ever capital mobilisation. Lot of liquidity will be sucked off from the secondary market. This will make its way to the primary market.
Real estate giant DLF has set a price band of Rs 500-550 per share for its initial public offer and lowered its mop-up target to a maximum of Rs 9,625 crore, against earlier estimates of up to Rs 13,600 crore. The issue will open on 11 June and close on 14 June 2007.
DLF would come out with a public issue of 17.5 crore equity shares of Rs 2 each through 100% book-building process. The post-issue dilution of the issue would be over 10%. This public issue would still be largest IPO as ONGC had raised Rs 10,500 crore through follow-on-offer, a company official said.
Also the country’s second largest bank, ICICI Bank, has sought approval from Sebi to sell Rs 17,500 crore of shares to local and overseas investors. The bank has set a target of launching the issue in June. The offer may be raised to Rs 20,100 crore depending on demand, the sale document said.
Asian markets were trading weak. Japan's Nikkei plunged 1.59% or 280.86 points at 17,416.11, while Hong Kong's Hang Seng index tumbled 1.38% or 286.48 points at 20,512.49.
Taiwan's Taiwan Weighted (down 0.82% or 67.63 points at 8,148.78), Singapore's Straits Times (down 1.09% or 38.45 points at 3,491.81) and South Korea's Seoul Composite (down 0.42% or 6.89 points at 1,639.70), were also trading lower.
Wall Street retreated yesterday after housing data showed sales surged in April by the largest amount in 14 years and damped hopes that an interest rate cut would be needed to stimulate the economy.
The Dow Jones industrial average fell 84.52 points, or 0.62%, to 13,441.13. The shift in the direction of the Dow and the other major indexes Thursday was pronounced. The Dow rose nearly 100 points to 13,624.55 early in the session -- eclipsing its previous trading high of 13,609.75 reached Wednesday -- before pulling back.
Broader stock indices also declined. The Standard & Poor's 500 index lost 14.77 points, or 0.97%, to 1,507.51, and the Nasdaq composite index fell 39.13 points, or 1.52%, to 2,537.92.
Except Patni Computers, all the Indian ADRs ended with sharp declines. Rediff plummeted 3.66% and VSNL crashed 3.19% while, Infosys, Satyam, Wipro, HDFC Bank and Tata Motors dropped 1-2% each.
Crude oil rose from a one-week low in New York on speculation U.S. refiners will have to increase fuel production to restore stockpiles and meet peak summer demand. Crude for July delivery rose as much as 35 cents, or 0.6%, to $64.53 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $64.38 at 10:30 a.m. in Singapore.
The contract fell $1.59, or 2.4%, to $64.18 yesterday, a one-week low and the biggest one-day decline since 9 April.
Brent for July delivery was at $70.67 a barrel on the London-based ICE Futures exchange, after rising 0.2% to $70.72 yesterday, its highest close since 28 August.
Technically, the Sensex has strong support at 14,000 level and on the upside faces a stiff resistance at 14,600 level. Similarly, the Nifty has support of 4,180 on the downside, while on the upside there is a near term resistance at 4,300.
The annual monsoon is predicted to strike the Kerala coast Sunday, 27 May 2007, four days ahead of its normally scheduled date of arrival on 1 June 2007. From Kerala the monsoon travels upwards to the parched central Indian plans and is expected to bring rains to New Delhi by the end of June
Nervousness may continue
After witnessing a slump of over 235 points in last couple trades, the market is likely to remain shaky on weak global markets. Although FIIs and domestic mutual funds have been providing cushion by remaining net buyers, the sentiment is likely to remain bearish. Among the key domestic indices, the Nifty may get support at 4180 and may test higher levels at 4300. The Sensex has a likely support at 14000 and on the upside could test 14600 levels.
US Indices tumbled on Thursday, on concerns that the Federal Reserve won't cut interest rates by the end of the year as the sales of new homes has increased. While the Dow Jones tumbling by 85 points to close at 13441. The Nasdaq declined 39 points on weak tech stocks and closed at 2538.
Except Patni Computers, all the Indian ADRs ended with sharp declines. Rediff plummeted 3.66% and VSNL crashed 3.19% while, Infosys, Satyam, Wipro, HDFC Bank and Tata Motors dropped 1-2% each.
Crude oil prices fell further, with the Nymex light crude oil for July series slipped by $1.59 to close at $64.18 a barrel. In the commodity segment, the Comex gold for June delivery slumped $9.30 to settle at $653.30 an ounce.
Sharekhan Investor's Eye dated May 24, 2007
Wockhardt
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs552
Current market price: Rs406
Annual report review
Wockhardt has set a target of achieving sales of $1 billion by 2009. The company believes that it would benefit from the market potential of India's population of over one billion, the projected boom in health insurance (an area in which the country is currently woefully underdeveloped) and new government initiatives to enable the majority of the population to access the life saving drugs. On the other hand, the company's outlook for regulated markets like the EU and USA is robust. Both the organic and inorganic initiatives would drive the growth of the company in the regulated markets.
However, the company has already given a revenue guidance of $1 billion for 2009; out of this $700 million will come through organic growth while $300 million will come as contribution from the inorganic initiatives. For CY2007, the company is targeting to cross sales of $500 million and maintain the net margin in the range of 16-18%.
Universal Cables
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs179
Current market price: Rs95
Q4 results beat expectations
Result highlights
- Universal Cables Ltd's (UCL) Q4FY2007 results are ahead of our expectations.
- UCL's net sales grew by 51% to Rs129 crore; and the net profit grew by 77% to Rs6.2 crore as against our expectation of Rs5 crore.
- The operating profit margin (OPM) for the quarter improved by 137 basis points to 10.84% on account of operational efficiencies as the other expenses to sales ratio declined to 10.78% from 14.43% last year. The operating profit for the quarter grew by just 74% to Rs12.2 crore.
- We had mentioned in our previous update that we expect the OPM to improve, as the company focuses on the high-end products that have better margins and as its 100% subsidiary Optic Fibre Goa Ltd (OFGL) turns profitable. On a full year basis this optic fibre business recorded a turnover of Rs15 crore, growing by 100% over the last year. Its PBIT stood at Rs1.4 crore as against the loss of Rs1.6 crore in the previous year.
- The interest expense for the quarter increased by 50% to Rs1.79 crore and the depreciation cost for the quarter increased by 94% to Rs2.25 crore. The interest and depreciation charges increased because the first phase of the technological upgradation-cum-expansion project was commissioned and commenced commercial production during the quarter ended March 31, 2007. The project uses Vertical Continuous Vulcanization (VCV) process for manufacture of XLPE Power Cables.
- For the full year ended March 31, 2007, the net sales grew by 27% to Rs377 crore and the net profit grew by 33% to Rs22 crore.
- The company has recommended a payment of dividend for the year @ Rs2.40 per share (ie 24%), thus the stock also offers good dividend yield.
- At the current market price of Rs95, the stock is quoting at 7.2x its FY2008E earnings per share (EPS) and 5x its FY2008E enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA). We maintain our Buy recommendation on the stock with price target of Rs179.
Punjab National Bank
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs578
Current market price: Rs535
Higher one-time provisions affect numbers
Result highlights
- The Q4FY2007 results of Punjab National Bank (PNB) are much below our expectations with the profit after tax (PAT) reporting a decline of 17.7% year on year (yoy) to Rs237 crore compared with our estimate of Rs460 crore. The PAT declined mainly due to higher than expected staff expenses (Rs300 crore of one-time AS-15 related prudential provisions) and higher marked-to-market (MTM) investment depreciation.
- The reported net interest income (NII) was up 20.6% yoy but down by 1.6% quarter on quarter (qoq) to Rs1,423 crore. However, adjusted for a one-time cash reserve ratio (CRR) interest income of around Rs56 crore the NII was up 15.8% yoy and down 5.5% qoq. Our calculations suggest that the net interest margin (NIM) of the bank has declined on a sequential basis by 36 basis points due to a decline in the asset yields (as interest on investments declined) combined with an increase in the cost of funds.
- The non-interest income was up 23% yoy. The 29.5% yoy growth in the core fee income was one of the highlights of the current quarterly results.
- Provisions for the quarter were high at Rs613 crore, of which Rs330 crore was on account of the MTM losses on the bond portfolio.
- The asset quality of the bank has shown some deterioration with the net non-performing asset (NPA) in percentage terms at 0.76% in March 2007 compared with 0.42% in December 2006 and 0.29% in March 2006. However, the gross NPA stood at 3.45% compared with 3.65% in December 2006. This was largely due to a higher advance base because in absolute terms the gross NPA increased to Rs3,391 crore from Rs3,268 crore in December 2006.
- We have reduced our earnings estimate for FY2008 by 6% to Rs1,971 crore mainly due to higher NPA related provisions. Despite the decline in the NIM on a sequential basis the bank's NIM still continues to be among the highest in the industry. We expect the NIM to stabilise going forward and improve the profitability of the bank. At the current market price of Rs535, the stock is quoting at 8.6x its FY2008E earnings and 1.4x FY2008E book value. We maintain our Buy call on the stock with a price target of Rs578.
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